Realtors: Housing market still strong

Friday, June 3, 2005

Fiscal restraint and supply and demand are fueling the gains in the median sales price of single-family homes in Cape Girardeau rather than speculation and easy credit terms, say area real estate agents.

"The market here is more in balance," said Thomas M. Meyer of Thomas L. Meyer Realty Co.

Meyer credits the fiscal conservatism of Cape Girardeau's German heritage for keeping the housing market stable and affordable. "It allows us to survive better in economic downturns," he said.

Across the country, double-digit annual gains in median sales prices of existing single-family homes has economic experts worried, especially if the economy slows.

Federal Reserve chairman Alan Greenspan expressed those concerns last month. Though Greenspan rejected the existence of a national housing bubble, he said it was hard to ignore all the local bubbles: the people overextended in real estate purchases and the increased speculation in mortgage and housing markets.

Nationally, the median sales price for existing single-family homes climbed to $188,800 in the first quarter, up 9.7 percent from the same period a year earlier, according to the National Association of Realtors.

In 1999, the median sales price of a single family home in the Cape was $112,119, said Linda Ervin, executive secretary of the Cape Girardeau County Board of Realtors. The median sales price of an existing single-family home for the first five months of 2005 was $141,728. The median sales price for existing single family homes in 2004 was unavailable.

Though an National Association of Realtors' survey shows housing is still affordable, soaring prices in some places across the country are pushing middle-class and lower-income workers out of the market.

Meyer said that is not the case here.

The overall cost of housing in Cape Girardeau on average has gone up only about 3 percent this year, Meyer said. But the average sale price of upscale existing single-family homes has risen sharply, up 10 percent.

"Certain price ranges have appreciated more for competitive reasons," he said.

Meyer said city housing sales are governed by supply and demand, and the 10 percent increase in prices of upscale homes is related to the number of growing families looking for larger spaces.

"More people are looking to upgrade today due to lower interest rates and families increasing or decreasing in size. We don't perceive this as a bubble because of our conservative German heritage and their spending habits," he said, borrowing from the common perception that Germans are frugal.

He said past economic downturns were mild here, in part, because people switched from credit to cash to purchase housing.

Walter Molony, a spokesman for the National Association of Realtors, agrees with Meyers, though for different reasons. "The prices in the Midwest increase steadily over time and can adjust more easily to periods of high or low demand," Molony said. "We never had a double-digit runup in prices in the Midwest."

Molony attributes the overheated housing market to lack of supply in large urban areas, especially those on both coasts, and dismisses suggestions that the increases are related to people speculating in the market.

"It's an unsupportable premise," he said, though a slow down is expected, he insists a national bubble collapse is not coming unless there is a national emergency.

"We are likely to see some markets go through a temporary price correction," he said, and the people who bought at the top of the market "will have to bring money to the table to sell them."

Meyers predicts 2005 will turn out to be the fifth consecutive record year for local housing sales.

"We're having a very good year. Sales are up around 1 percent over last year and last year was a record year," said Ken Inman, broker/owner of Century Twenty-one Ashland Realty.

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